Casual empiricism suggests that additive trade costs, such as quotas, per-unit tariffs, and, in part, transportation costs, are prevalent. In spite of this, we have no broad and systematic evidence of the magnitude of these costs. We develop a new empirical framework for estimating additive trade costs from standard firmlevel trade data. Our results suggest that additive barriers are on average 14 percent, expressed relative to the median price. The point estimates are strongly correlated with common proxies for trade costs. Using our micro estimates, we show that a reduction in additive trade costs produces much higher welfare gains and growth in trade flows than a similar reduction in multiplicative trade costs.
This paper introduces idiosyncratic …rm e¢ ciency shocks into a continuous-time general equilibrium model of trade with heterogeneous …rms. The presence of sunk export entry costs and e¢ ciency uncertainty gives rise to hysteresis in export market participation. A …rm will enter into the export market once it achieves a given size, re ‡ecting its e¢ ciency, but may keep exporting even after its e¢ ciency has fallen below its initial entry level. Some exporters will not be selling as much in the domestic market as other …rms that never entered the foreign market. The model captures the qualitative features of …rm birth, growth, export market entry and exit, and death found in the empirical literature. We calibrate the model to match relevant statistics of …rms'turnover and export dynamics in the United States, and show that the mode of globalization (a reduction in sunk costs as opposed to overhead costs), matters for a …rm's selection and persistence in export status. Trade liberalization via a reduction in sunk export entry costs reduces a …rm's export status persistence, while the opposite happens when liberalization takes place through a reduction in overhead export costs.JEL Codes: F10, L11
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